Either repeal or revise the country's fiscal law

Instead of treating the FRBM Act's fiscal deficit cap as a quaint relic of times past, we must debate its basis. Post-covid times have been blurry, but clarity on policy constraints will help

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India is not a country of sticklers, by and large. It explains why the Union finance ministry’s economic review for September could use the word ‘solid’ to describe the Centre’s fiscal position, which, thanks to “steady revenue growth" and “prudent rationalisation of revenue expenditure," implies that it will meet its 5.9% deficit target for 2023-24, even though this inflow-outflow gap as a proportion of GDP is almost twice the limit specified by the country’s fiscal law. Of course, the 3% cap imposed by the Fiscal Responsibility and Budget Management (FRBM) Act of 2003 has long acquired the look of a relic. Moreover, it always had an escape hatch for crises like covid. Even more pertinently, it’s not as if awkward laws do not get glazed over. In the case of Article 377, for example, the judiciary in 2018 wisely chose to ‘read down’ a part of the penal code that outlawed gay sex. Since legislative action to fix the law would have involved a political rigmarole, that was taken as a practical way out, relieving our leaders of any need to t